Rugby Salary Cap: The soccer-style financial epidemic facing rugby

Muddy Rhino™ looks at the worrying rugby salary cap challenging the game of rugby union and identifies the main problem with the salary cap concept.

Sonny Bill Williams officially revealed, one the worst kept secrets in the game, he is to leave the Waikato Chiefs and return to rugby league possibly joining Sydney Roosters, but not before cashing in on a one-year deal with Panasonic Wild Knights. The deal is said to make SBW rugby union’s highest paid player with a reported potential salary in excess of $1.4m for roughly 10 weeks in Japan.

There is a no doubt SBW is an exceptional talent in either code of rugby, and a heavyweight boxing champion too, but All Black fans must feel a little aggrieved that they have yet to see him dominate the international arena. The stats tell us SBW, formerly of big-spending Toulon, Super Rugby’s most successful team Canterbury Crusaders and recently Waikato Chiefs, has won only 17 caps of which he started a modest 10 Test matches for the newly crowned World Champions.

Isaia Toeva is another turning his back on the All Blacks in favour of a bumper payday with Japanese club Canon Eagles. Toeva, the 26-years-old, was identified as a special talent from an early age making his international debut in 2005 at the age of 19 and has gone on to amass 36 Test caps to date. Arguably neither player is has fulfilled their potential.

I ask myself the question how many youngsters could you develop for a single year of SBW salary?

Others who this week announced they are jumping on the Japanese gravy train include Blues flanker Chris Lowrey who will join the Toyota Heavy Industries club on a two-year deal, and Springbok midfielder Wynard Oliver confirmed he will be joining Japanese club Ricoh Black Rams for a 6-month bonanza paycheque at the end of the Super Rugby season before returning the Blue Bulls in 2013. Lets not forget Shane Williams’ dramatic U-turn on rugby retirement to take up a one-year deal with Tokyo-based outfit Mitsubishi Dynaboars.

Player salaries represent the largest proportion of expenditure for nearly all clubs. The transfer activity ultimately increases the wage bills and now the cracks are starting to show at club level. Rising salaries stretch some clubs to the point where they go further into debt to trying to keep up.

Recent news reports in Wales reported than Newport Gwent Dragons made a loss of nearly £272,000 in the year ending May 2011 and are almost £2.4m in debt. Cardiff Blues made a loss of £2.3m, the Scarlets – who have a total debt of £5.5m – made losses of £1.8m, and the Ospreys reported £1.46m losses during the same period.

In March 2012 Otago Rugby Football required a rescue package from the New Zealand Rugby Union loaning the debt-saddled Otago Union £255,000 and erasing £138,000 of debt. Likewise, in April 2012 it was reported that London Wasps were in grave danger of going into administration unless they attracted new investment. In June 2012, Montpellier benefactor Mohed Altrad announced the club was £2.35m in debt with the club requiring a short-term injection of financial capital to the tune of at least 10% of payroll, or about £700,000. Surely this indicates that rugby is threatened with unsustainable spending on player salaries.

In 1999 Premiership Rugby in England introduced the first salary cap at £1.8m, it has now reached £5m.

The first rugby salary cap was introduced in England by Premiership Rugby in July 1999 as a result of concerns over the financial sustainability of clubs in the league. I question whether the game can sustain rising players salaries. How long is it before rugby follows suit and sees a soccer-style Portsmouth, Leeds United or Glasgow Rangers epidemic?

Granted, the profession of a rugby player is a short career and that its employees wish to financially safeguard their future. It is also true that the transfer of players between clubs adds excitement and a relatively new dimension of commercialisation to the game of rugby… but at what cost?

Every finically motivated player-move sends unsustainable ripples throughout the professional tier of the game. Players become more financially motivated and clubs become more fearful of failure, resulting in the club benefactors and fans picking up the bill or face the possible financial collapse of the club.

Does rugby want a series of winding-up orders for its clubs? Does rugby want a small number of clubs dominating the landscape of domestic and international club competitions? Or does rugby want a player culture that is financially motivated rather than motivated by success? That scenario sounds a bit too much like soccer for my liking.

To overcome some of these financial worries many member Unions of the International Rugby Board have installed a salary cap for its top-tier clubs, but there-in lies the problem. The ideology of localised salary present players with the option to look outside their domestic Union to nations with a more lucrative salary cap.

The solution lies with the international Rugby Board; it is the IRB’s duty to govern the game on a global scale. I’m not suggesting rugby denies a player the right to maximise their earning capacity in France, Japan or any other Union. But maybe the answer is a common salary cap across all IRB Union members to ensure the long-term sustainability of the game.